Arkansas Valley State Bank v. Phillips, ___P.3d ___, 2007 WL 3012848 (Okla. S. Ct. 2007)

Brief Summary

The Oklahoma Supreme Court held that counsel should not be disqualified based on the “appearance of impropriety” test. Moreover, disqualification should only be based on specific factual findings following an evidentiary hearing and the burden is on the movant to establish the need for disqualification.

Complete Summary
The complex history of this case involves four essential actors: a bank (Arkansas Valley State Bank), a broker (Wilbanks Securities), a lawyer (Wilkinson), and an employee of the bank (Witham). The lawyer defended the broker in the [first] lawsuit against the bank. The employee was deposed as part of this suit. Thereafter, the employee was terminated. The ex-employee hired the same lawyer, Wilkinson, for a [second] suit against the bank. The bank alleged in the second suit that the lawyer should be disqualified because he had received confidential work product information from the ex-employee regarding the first suit. The trial court granted the disqualification motion. The Oklahoma Supreme Court abandoned the appearance of impropriety test, and vacated the district court’s order.

In granting the disqualification motion, the trial court had implicitly used the “appearance of impropriety” test in conjunction with a standard requiring disqualification where there is any doubt about the appearance of propriety. Id. at *5. Noting that this test was too easily satisfied, and therefore prone to being abusively employed as a procedural weapon, the Supreme Court found it necessary to adopt a less subjective test. Id. at *6. In branding the “appearance of impropriety” test “excessive[ly] subjectiv[e],” the court cited for support the Comments to Rule 1.9 of the Oklahoma Rules of Professional Conduct, which criticize the phrase for its potential subjectivity and for the absence of a definition of “impropriety.”  Id.

The court noted that while other jurisdictions use tests with varying degrees of subjectivity, each test recognizes — in addition to the right to choose counsel and the duty of confidentiality — the public’s interest in preserving the integrity of the judicial process. Id. at *5. This interest was adopted as the standard for disqualification. Id. at *7. Counsel should not be disqualified unless there is a risk of “real harm to the integrity of the judicial process.” Id. at *6. The court acknowledged that a real harm would exist if, inter alia, client confidences were improperly in the possession of an opposing party. Id. at *3. But the operative word appears to be “real” because the fundamental right to choose counsel should not be abrogated if the “realness” of such harm cannot be objectively established. Id. at *6.

In order to objectively determine whether a motion for disqualification is appropriate, the trial court must make a specific factual finding based on an evidentiary hearing, and the burden is on the movant to establish the necessity of disqualification.

Significance of Opinion
Oklahoma has joined the overwhelming majority of jurisdictions in holding that the “appearance of impropriety” test is too vague and subjective to be a basis for disqualification.

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